For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.

Retirement…it’s an adventure, not a destination. Most of us set a goal while we’re working to save for an early and prosperous retirement. We budget during our working years and invest wisely to reach our retirement goals. But once retired, your investment strategy doesn’t stop; it’s simply refocused on maintaining your lifestyle and achieving all of your retirement dreams. Retirement isn’t the end game—it’s a phase of life that can span more than 30 years.

As each generation lives longer, retirement lasts longer. And even though the average retirement age is increasing, our longevity is outpacing our additional working years. For many, those years in retirement are healthier than they were for our parents and grandparents. As you set your goals, consider how many years you plan to spend in retirement based on your expected lifespan and how you wish to live. We used to say that most retirees would spend 15% less in retirement than while working; however, if your retirement includes additional travel or other hobbies that you weren’t enjoying while working, spending can be the same, or even greater.

The most important decision for retirees

A key consideration for both saving for retirement and investing during retirement is your asset allocation. The day you retire doesn’t usually entail a dramatic shift in asset allocation. You might expect to shift most assets to bonds for income and stability. However, in a low-yield environment, it’s especially important to have stocks in your portfolio to provide long-term growth. This is particularly true if you expect to have a 20–30 year retirement.

Rather than only drawing income from your portfolio to support your retirement spending, a total return approach (using both income and capital appreciation) gives you a better chance of meeting your goals. Research shows that if you have a balanced portfolio, you can expect to draw 3–4% from your portfolio each year and still maintain your spending power over your lifetime. If you have to spend more than 4%, you could choose a portfolio with a more aggressive asset allocation to provide the growth you need. Maintaining an adequate cash reserve for short-term needs can alleviate concern over portfolio balance fluctuations.

Keep an eye on your tax bill

It’s also important to consider which accounts you spend from first, and how those accounts are invested. Investing tax efficiently, both before retirement and after, can allow you to keep more of your earnings. Owning taxable bonds in your tax-deferred accounts, and stocks in your taxable accounts, can result in higher after-tax returns over time. Usually investors will benefit from a spending strategy that preserves tax-advantaged accounts longer. You may spend from your taxable dollars first, given that the tax liability may be less, then from your tax-deferred accounts, and lastly from your tax-free (Roth IRA) assets. However, if you’re required to take distributions from your IRA, or are in a relatively low tax bracket and expect to be in a higher tax bracket in the future, you may benefit from spending some dollars from your tax-deferred accounts earlier. Your financial advisor can assist you in determining the most appropriate method of spending for your situation, which may change from year to year.

While saving for retirement is a long-term goal, investing during your retirement can also be a long-term endeavor. Planning for retirement, and living in retirement, are organically linked. The day of your retirement is certainly a celebration of many achievements, but it doesn’t require any fanfare for your portfolio. Your investment strategy during those golden years may be quite similar to how you’ve always invested: balanced, well-diversified, tax-efficient, and low-cost.

Julie Virta

Julie Virta is a senior financial advisor with Vanguard Personal Advisor Services®. She has more than 20 years of experience in the financial services industry. Since joining Vanguard in 1999, Julie has been providing financial planning and advisory services to high-net-worth clients. She is a Certified Financial Planner™ professional and a Chartered Financial Analyst charterholder with a bachelor’s degree in finance and marketing from Boston College.

Bob F. | April 8, 2017 2:46 pm

Donald G. | May 7, 2017 10:00 pm

To Bob F. 4-18-17 2:46p.m. It appears you are asking questions from my blog Richard G. 11-26-16 7:42 p.m.RMD’s are Required Minimum Distributions that you must take out of traditional IRA’s at age 701/2 as required by the IRS.If you have done as Vanguard has counseled you to do with your retirement account then you should be making MORE money in your retirement than you are required to take out per the IRS table. The first years distribution is at 3.66%for age 70.You should have no trouble doubling or tripling this figure over the long term. If you are earning more than the rmd then your next years check will be based on a larger balance plus the % goes up each year as well.A COLA is provided some retirees by their employers. This is a Cost Of Living Adjustment.Social Security has this feature although our August Congress sometimes “forgets” to give them out to federal retirees and S.S. recipients.If your employer does not provide them then you have to go to plan B and provide one from your own investments, either on your tax deferred side or with your taxable savingsI plan to give myself a COLA from only the taxable side of my savings when and if I need one.The one BIG way that you can give your self the best COLA is to be debt free in retirement.This will relieve all kinds of financial pressure off of you to not be forced to have to raise income because you have no debt load.Good Luck to you in retirement!It is great being an owner at Vanguard..

This is My Plan. I am 60 years old, with No Mortgage & No Pension just SS at 66.4 (Full Retirement) which will be about $1,900/month or $22,800/year. I am starting to get tired so I plan on slowing down over the next year or two. Between Working part time and or SS I can live fine on $50,000 a year or a little more if I want to treat myself. If I need a car (every 10-13 years) or a roof, I will just take it out of my Portfolio. Currently my Investments are $1,600,000. and growing at about 100,000 per year invested 75% Stocks, 12.5% Bonds, & 12.5% Cash.. At 61 I could have 1.7 M & at 62 1.8 M. In my 60’s I will move some IRA Money to Roth IRA so that I don’t have a large Tax Bill in my 70’s and beyond. When I die it all goes to Charity. I don’t want to wait to 70 I want to start taking it easier and enjoying it sooner. Any thoughts?

Richard G. | December 14, 2016 1:10 pm

To niagramike 11-11-16 8:19 p.m. Sir you are in an outstanding financial position in my opinion.You have no employer retirement but you have about 10 times what I have in my portfolio.You are so right you are looking at a $70,to $80,000/yr tax bill at RMD time on almost $2,000,000.00 IRA.Do you not have any family or any desire to maybe help a grand child with their education?Remember also that once you hit RMD’s at 701/2 the IRS withdrawal % is progressive.It start’s at 3.66%@age 70 and INCREASES at .9%/yr. at age 71.You might want to consider gifting some money now to your charities.I believe you can gift to any one up to $14,000.00/yr.As a member of Vanguard you can call them up if you haven’t already and they can give you the whole scoop about gifting and charities. Good Luck in your retirement Sir.You have an very large account and I would be doing every thing that you enjoy doing.

Larry T. | January 9, 2017 5:18 pm

Sounds like you have done a lot right. I really like the Charity part. I know how you feel in getting tired as 60 comes on. With your portfolio you may think about 62 retirement? I did about 60 for retirement and 62 s/s. Rentals keep the cash flow going. I started rolling 401k money into a Roth for 5years before the RMD came due. This really depends on your tax’s but for me it worked due to Rentals. I have been in RMD’S for the first time last year. The roll over to Roth helped smooth the tax liability for me. I like to keep Fed. tax at 15 to 20%. Hope all goes well for you including good health.

Richard G. | November 26, 2016 7:42 pm

Well Folkes it seems to me that there are several ways to hedge your bets to keep from running our of money during your retirement years.#1 Do not start your withdrawals until RMD age.#2 Invest so that you will be making MORE than the minimum amount for that year.#3 Do NOT take a COL from your retirement account.(Take it out of your taxable side of your savings if you need one.)#4 Just because your have to take out a minimum amount does not mean that you have to SPEND it all but can save some or all of it on the taxable side of your portfolio.(Maybe use some of this money to give you a cola-see above#3)You are already not suppose to be investing any money in the market that your going to need for a minimum of five years so this should all be moderate to long term money that we have in our retirement portfolios. My wife and I start RMD’s in 2018 and all of our retirement is discretionary income. We are just going to take out the minimum and have fun with it.I plan on giving the better half a few thousand on black friday in 2018 and let her figure out where to go spend it.I know that this will put a burden on her but somebody has got to do it. We love Vanguard and we have retired 8 years early and really enjoy our grands. Good Luck to All and may everyone have the best of holidays! Let’s go get our 4th Trillion Folkes!

Stephen M. | November 7, 2016 8:43 am

You say “Research shows that if you have a balanced portfolio, you can expect to draw 3–4% from your portfolio each year and still maintain your spending power over your lifetime.”
But what if, for instance, you needed to replace your car? A 3% to 4% draw couldn’t be maintained after making such a purchase. And certainly, if you had the money, you wouldn’t want to take out a car loan.
The 3% to 4% draw doesn’t make sense because expenditures — whether you are retired or not — can vary dramatically from year to year.

David P. | November 7, 2016 9:00 pm

If you planned to withdraw 4% per year from the portfolio-and you would have to peg the value to some measure such as the Jan. 1 or some other arbitrary date- and you had a catastrophic draw down of more than that-then your 4% for the next year would be less—–(4% of a smaller Jan. 1 value)
Some people might withdraw 4% of the same initial value for each subsequent year but that would tend to be more apt to drive the portfolio down towards nothing
If RMW requires that more than 4% be withdrawn from a tax deferred balance then of course the excess over 4% would get transferred into a taxable account-perhaps even into the same Fund as the balance subject to the RMW (required minimum withdrawal per IRS) requirement

If the portfolio is the only source of income and sustenance then one must be more careful and mindful of not exhausting it vs. someone who has other annuities or pensions to count on.

Michael S. | November 9, 2016 8:13 pm

I would assume the 3-4 percent guideline refers to an average behavior. Then, purchase of a single large item would be fine if future purchases were kept at the guideline or slightly below for a moderate time period. Then onto the next purchase!

Donald G. | November 14, 2016 9:39 am

To Stephen M.11-7-16 8:43 a.m. Sir you need to remember that this 4% figure is predicated by you STARTING your retirement at RMD age.If you are going to raid your retirement at any time before then then you will not be able to withdraw even this 4% and hope to sustain this through out retirement.Thats why people file for S.S. at 62 or when ever they stop working so they can let their 401k,IRA money set and grow from 62 to 701/2.You did not reveal anything about your finances and of course there are exceptions to this rule.If you happen to be setting on an extremely large retirement balance (north of a million) and you had zero debt and had a healthy taxable savings account you might be able to make your program grow if you began withdrawals before RMD age.Common sense should tell you that the longer you wait to start withdrawals the better the chance of your account growing if for no other reason than you are asking your program to sustain you for less years in retirement.Of course if you have a 7 figure nest egg and take out 4% I can see where a fellow could buy himself a “decent” car with $40,000 plus.Vanguard has a withdrawal service to help their clients/owners manage your IRA/401k withdrawals. Good Luck with your program.

William R. | November 3, 2016 9:27 pm

i’ve been retired for 11 years now, and have a well fundeed portfolio via Vanguard. I can only say that my returns have exceeded those of most of my friends, and via Vanguard I do not have the expenses they incur. My returns may not be as high as some, but with the difference in expenses, I really can’t understand why anyone would really need a broker or advisor who gets a percentage fee. It really doens’t take a rocket scientist to save and invest wisely with the information available via Vanguard.

William H. | November 4, 2016 8:53 am

Douglas M. | November 24, 2016 1:39 pm

William, the theoretical answer to a conservative investor of your age would be 50% in stocks (S&P 500 fund?) and 50% in bonds. But remember that we are probably in a rising rate envirobnment now, and you may see a slow but steady decline in the value of your bond funds.
For me, I would put 50% in the S&P fund and the other 50% in money market, at least until we know what is going to happen.

Charles G. | December 8, 2016 9:46 pm

Jim O. | November 3, 2016 8:47 pm

I wish someone would address the issue of those with a secure defined benefit contribution retirement program and how their other stock investments are viewed, risk-wise, in light of this secure environment. Thank you.

Richard G. | November 8, 2016 12:49 pm

To Jim O. 11-3-16 8:47p.m.You were asking about defined benefit retirement and how it affects your asset allocations.We are Federal retirees.After 44 years we both filed and are receiving S.S. checks too.If you are debt free or at least have manageable debt load in retirement then I feel you can be more aggresive in your investment %.We consider these locked in checks as bonds and so We maintain a 70/30 asset allocation. We buy the whole market and we do not get out of the market.The program that we use and believe in suggested that you use Vanguard index funds.We also make no moves at all based on a guess or a forecast.Every one to two years we bring up our program and based on facts that we see in our program we rebalance back to our origional asset mix.If six of our funds have gone up we sell those and buy the 4 that have gone down. It does take a little bit of financial “back bone” to buy into something that is falling..We look at it like a BOGO you are buying cheap while it is down and we know that it will aright itself in the future and will make you money down the road.All of our six figure investment with Vanguard is discretionary income.Vanguard has allowed us to retire 8 years early. Oh by the way we are only managing a IRA now. In 2018 all things will change and RMD’s will start and then we will have to manage taxable,tax deferred and some tax free income.I plan on calling up Vanguard in 2017 and say I sure would like some help in managing all of this wealth .

Louis S. | November 3, 2016 7:56 pm

10 years ago I moved my company 401k into a Deferred Variable Annuity (7% guarantee annually) with ING/VOYA. It has grown slowly, but much slower than expected. Would you recommend my rolling this into my Vanguard Wellington? I retired 4 years ago and just turned 70.

Richard G. | November 8, 2016 1:19 pm

To Louis S. 11-3-16 7:56 p.m.Sir you are not giving out enough information on this blog. A reputable CFP needs to know specifically what you have in place now before they could advise you in a positive way.I would think that you might want to look at any potential surrender fees which may or may not be involved with an annuity.If your deferred annuity is growing to slow for you with a 7% guaranteed return then are you thinking that your Wellington account will pay more?One of Vanguard’s mantra’s has always been diversify and stay broad based.Depending on your other assets and how you have them invested this may or may not be a good move for you.Please call up Vanguard and give them your specifics and they will be glad to help you.

Hi Louis,
Deferred annuities within a deferred IRA rollover account are expensive and redundant. The IRA is already deferred, and buying the deferred annuity within it is unnecessary. While a guaranteed return can be welcome, it comes with additional cost. In many cases the average expense for a variable annuity can be 2.25%, which significantly reduces the returns you keep.
In most cases you can do a tax-free exchange of a qualified annuity to your IRA rollover, which would allow you to invest in mutual funds. You’ll also want to check if there are surrender charges for getting out of your annuity; however, after 10 years you should be fine. Investing in a well-diversified, low-cost, balanced portfolio will allow you to keep more of your investment returns.

David P. | November 2, 2016 8:18 pm

I would be wary of keeping everything in a single stock mutual fund representing all of my assets and income source but if I were forced to do so (a single fund) perhaps something like Wellington Fund would be less risky than a fund holding all stock
also those new-fangled “retirement income funds”?

Good mutual funds make the case for holding some individual dividend yielding stocks less compelling?
was Vanguard’s predecessor company the first investment house to sell “no load”?

Joseph C. | November 4, 2016 8:29 am

While old maxim that past performance is not a prediction of future returns, the Wellington Fund, one of the first of the now popular balance funds, has quite a reliable history of performance going back many decades. And like all Vanguard funds you get to keep a larger share of the earnings. I’m currently invested in Wellington as an IRA.

Cal R. | October 24, 2016 12:14 pm

Speaking of investment costs picture this. You have a modest 500k in your IRA.
You take out the 4% per year 20k. Your advisor takes 1% per year 5k. Your adviser is getting 20% of the money coming out !
I took the retirement at 55 and handed my IRA to an advisor.
Got the following: Tech bubble”, the advisor who did market timing, the top 100 advisor who stayed fully invested in 2008, and the variable annuity. Talk about the “Monte Carlo” simulation!!!
A year ago I created four model portfolios. One using my advisor based 28 fund IRA, one based on four Vanguard funds, and two others. The Vanguard portfolio matched within a few hundred dollars the advisor managed IRA and didn’t have the additional 1% management fee.
I should have looked into Vanguard about ten years ago.

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For more information about Vanguard funds, visit vanguard.com or call 877-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. Stocks of companies based in emerging markets are subject to national and regional political and economic risks and to the risk of currency fluctuations. These risks are especially high in emerging markets.

All investing is subject to risk, including the possible loss of the money you invest.